Bid BondHere, a bid bond / tender bond is issued to ensure that the exporter submits realistic bids under the tender process and to protect the importer for any loss that might occur if the exporter fails to sign the contract. Bid bonds are issued for 2% to 5% of the tender amount. A bid bond is often a condition for the consideration of a bid.

Advance paymentAn advance payment bond will ensure repayment to the importer of an agreed percentage of the contract amount (typically 10%-30% of the contract amount) if the exporter does not fulfill its contractual obligations.

PerfomanceA performance bond safeguards the importer, should the exporter fail to meet its contractual obligations. Obligations under a performance bond could concern supply obligations or obligations concerning function and quality during the agreed period of the guarantee.

PaymentA payment guarantee ensures payment to the exporter if the importer does not fulfil its payment obligations.A payment guarantee can be issued in the form of an endorsement on a draft, also known as an “aval”. In such cases Gulf African Bank guarantees the payment of the draft.

RetentionWith the supply of factory plant, machinery and other capital goods, it is often agreed that the buyer may withhold 5%-10% of the contract amount for a guarantee period, for example 12 months after the plant or machine(s) are up and running. The exporter may wish to receive the full contract amount before the end of the contract period (in the example given above, 12 months) by issuing a retention bond that covers the amount that would otherwise be withheld. The exporter will request its bank to issue a retention bond in favour of the buyer. Once the buyer receives the retention bond he will transfer the amount of the bond value direct to the exporter by international money transfer.